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EU Readies for Shale Gas Breakthrough

Ukraine in May hosts a summit to explore the potential for shale oil and natural gas in Europe. Ukraine and its Eastern European neighbors may host some of the more promising shale basins in the region. Now Spain and Germany are looking to explore their potential. With the European Union outlining recommendations for shale exploration, the region looks ripe for a breakthrough.

Ukrainian company Nadra Ukrayny, along with co-sponsor International Gas Union, hosts a summit May 20-22 to discuss maximizing the benefits of shale exploration in the European community. Organizers say the event will have a pan-European focus, with strategy sessions focused on the shale potential from Eastern Europe to Great Britain.

Weeks before Ukrainian President Viktor Yanukovych sparked major unrest with his November decision to back away from the EU, his government signed a $10 billion shale natural gas deal with U.S. supermajor Chevron. Under the terms of the deal, Chevron agreed to pay an initial $350 million for exploration work in the Olesska shale, which Kiev says could produce more than 200 billion cubic feet of natural gas. Despite an uncertain political future, this means Ukraine is still one of more promising shale areas in the region.

Polish shale ambitions, meanwhile, were stymied in part by a decision from Italian energy company Eni to pull out of the country, the third company to do so since 2012. Eni said the geology was too complex to exploit now, leaving behind an estimated 187 trillion cubic feet of shale gas reserves. That too should pique future interest once technology evolves. Chevron remains one of the few players still in the Polish shale.

Last week, Rainer Seele, chairman of German energy company Wintershall, told delegates at a Berlin energy conference it was time for an honest debate about shale exploration. Late last year, German leaders agreed to keep a moratorium in place on hydraulic fracturing. Several European states have expressed reservations about the controversial drilling practice dubbed fracking. For Seele, it's time for "an informed debate and legal clarity" because now, he said, the conversation is at a standstill. In 2012, a report found there may be as much as 100 trillion cubic feet of technically recoverable gas locked on German shale.

Spain too entered the fray last week when the central government filed a challenge against a decision to ban fracking in Cantabria, a region near the coast of the Bay of Biscay. Regional leaders voted unanimously to ban fracking out of environmental concerns last year, but with Spain importing more than 70 percent of its natural gas needs, the 70 years' worth of gas in Cantabria is too rich to ignore.

France and Bulgaria are among other European states with fracking bans in place. Last week, the European Commission embraced a series of recommendations meant to ensure appropriate safeguards are in place for members that choose to go ahead with shale exploration. The EU said the recommendations were part of a policy framework meant to guide regional energy policy through 2030. EU Environment Commissioner Janez Potocnik said shale gas is "raising hopes" in Europe. With energy companies clamoring to get in line, Europe may be on the cusp of a shale breakthrough.

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